Rent or Buy? How to Decide Which One is Right For You

Rent or buy is a choice that many face there are things to consider before you decide. When you are caught up in the conversation it seems like a wild ride of different opinions. There are arguments to consider on both sides, but ultimately buying or renting is a personal decision that should make good financial sense for the long term. Advocates for renting believe that the flexibility of renting outweighs the benefits higher costs of buying property and maintenance costs. They also believe that buying is not a good way to invest money and the buying one large asset like a home creates lost investment opportunity in higher yield investments like the stock market. Home buying boosters believe that buying is a forced savings plan that you can live in and enjoy unlike a stock fund. They also point to the tax benefits and the growth of tax free equity over time. People that advocate buying a home also cite the intangibles of decorating your house, choosing home improvements and no rent increases.

Some people who buy a house expect equity to jump like a stock. Usually, things don't work that way. Houses increase incrementally over time in desirable neighborhoods. There are historical charts available by area where you can judge the strength or weakness of your market. House prices that are much higher than a comparable rental may signal a good time for investment since pressure from the market is likely to cause more drops. You have time to make the right choice. Get your credit and all financials in order so you will be ready to buy if you choose to buy at all. You may buy now, later or never, but any way you slice it, you will be a prepared informed buyer that is ready to make a good decision. If you do buy, look for a house that has a combined payment of mortgage, taxes and insurance (PITI) that is the same or less than rent if possible. If the cost of ownership is more than that, make sure that the difference between rent and your PITI are as close as possible for the maximum flexibility. Having a PITI close to rent is not perfect protection form a dropping market, but it will mean that you will not be forced to sell in a down market and mean that you can relocate for work without having a high house payment choking you.

Many markets still favor the renter. In the past, house appreciation was slow, but predictable. Buy well, pay a little at a time and when you went to sell, you were up even after the cost of ownership. Homeownership was a slow steady way to get protected growth over time. Now some of that stability is out the window with shuddering markets drowning in REO's and short sales, so renters can benefit by waiting until the numbers make sense. Renters have always benefitted where rents are cheaper than ownership costs. In many areas, the cost of rent vs own is still cheaper than a mortgage without other costs involved. I won't lie. Personally, I hate renting. It was problematic for me on my levels, but financially it can be an advantage in a market like this. It is a solid, valid choice with the main benefit of flexibility both personal and financial. Renters are not second class citizens who cannot afford to buy. Some of the smartest people chose to rent during the bubble and are just now looking to buy as the market is more reasonably priced.

There are many arguments to be made, but no matter what your opinion one thing holds true over time that buyers need to remember. There are reasons to rent and there are reasons to buy. Buying a house is like getting married. If you need someone to talk you into it, you should wait until it makes sense to you before jumping in or you will face bigger issues down the line. Keep your goals in mind, get your finances in order and keep your options open until buying makes good sense to you based on a larger financial plan.

Credit Stink? 10 Tips To Repair Your Credit For Free

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If your credit is bad, there are things you can to to improve it for free. Nobody's perfect, but when you go to get a mortgage loan, you feel all eyes upon your one shining credit score. Suddenly, your whole life seems to be distilled down to one number. I have gotten several questions about how people can raise their score before they apply for a mortgage. Here are 10 easy things you can do to raise your credit score.

1.     Pay your bills on time -- One late payment in a 30 days period can drop your score by as much as 90 points. Keep all accounts current and consider using auto bill pay to make sure they are paid on schedule.

2.     Use less than 30% of your credit limit -- Using credit wisely and staying within limits makes companies feel that you are creditworthy. It also leaves room for you to make another payment like a mortgage.

3.     Raise your credit limits -- A higher credit limit may mean a lower percentage of credit utilization. Calling credit card companies quarterly and asking for a limit increase can make your percentages look better overall.


4.     Make peace with bill collectors --Ask collectors to report accounts as "paid as agreed" or "paid in full". Some collectors will even agree to take old accounts off your report, but do not be tempted to pay expired collections. They have already been reported on your credit and paying them may actually lower your score


5.     Pay down balances -- Use your credit, but pay down the amount you owe. If you are looking to buy a house or other large purchase, pay down your balances to 10-15% of your credit limit if possible before you apply.


6.     Use an old credit account -- Old credit is your friend. Keep your oldest account and use it to boost your score. Part of your credit score is based on the length of your credit history, so in this case older is better.


7.     Remove all errors from your report -- Make sure all information like accounts, addresses and past names are correct. Leaving expired or incorrect information on your credit report makes it more likely that accounts that do not belong to you will be reported. Dispute any errors in your credit report to make is as accurate as possible.


8.     Limit credit inquiries -- Make all credit inquiries within a period of 45 days or less and do not open new accounts during that period. Limiting credit checks will help raise your score.


9.     Keep 4-6 accounts in good standing -- Banks and lenders want to see that you have a track record of doing solid business with more than one company. Keeping 4-6 revolving accounts in good standing demonstrates your financial stability. Utilities bills often do not count, but car loans, regular installment payments like student loans and credit cards do.


10.    Ask for a "goodwill adjustment" -- If you do have a late payment on an account that is now paid on time, ask the company to remove the old late as a goodwill gesture. Send them a goodwill adjustment letter. Many banks and credit card companies will remove one per 2 years or so if your account is in good standing.

Doing those 10 things can raise your score in just a 30-60 day period and make it easier for you to get the loan you want at the rate you want. Better credit is the key to stable homeownership.